GBP/USD and a Run at $1.20 Hinged on the UK GDP Report and the BoE

It is a busy day for the GBP/USD. According to the economic calendar, UK GDP, industrial and manufacturing production, and trade data will be in the spotlight.

After a lack of stats throughout the week, today’s numbers will draw plenty of attention.

Economists forecast the UK economy to contract by 0.5% in Q3 and manufacturing production to fall by a further 0.4%. Weaker-than-expected numbers should see the GBP/USD cough up some of Thursday’s gains.

Uncertainty over the Bank of England’s next move lingers despite the Chief Economist’s calls for more to tame inflation. A sizeable contraction would likely ease bets of another aggressive rate hike as Fed pivot bets rise following the US CPI report on Thursday.

Monetary Policy Committee members Jonathan Haskel and Silvana Tenreyro are due to speak after today’s report. Comments on the GDP report and monetary policy would also move the dial.

GBP/USD Price Action

At the time of writing, the Pound was down 0.06% to $1.17080. A mixed start to the day saw the GBP/USD rise to an early high of $1.17155 before falling to a low of $1.17014.

Technical Indicators

The Pound needs to avoid the $1.1597 pivot to target the First Major Resistance Level (R1) at $1.849. A breakout from Thursday’s high of $1.17312 will likely hinge on market risk sentiment and today’s GDP report. Better-than-expected numbers would support a return to $1.18.

In the case of an extended rally, the GBP/USD would likely test the Second Major Resistance Level (R2) at $1.1983 and resistance at $1.20. The Third Major Resistance Level (R3) sits at $1.2368. The UK economy would need to avoid a contraction to bring $1.20 into view.

A fall through the pivot would bring the First Major Support Level (S1) at $1.1463 into play. However, barring a UK GDP report-fueled sell-off, the Pound would likely avoid sub-$1.1350 and the Second Major Support Level (S2) at $1.1212.

The Third Major Support Level (S3) sits at $1.0826.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The GBP/USD sits above the 50-day EMA, currently at $1.14574. The 50-day EMA pulled away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A hold above S1 ($1.1463) and the 50-day EMA ($1.14575) would support a breakout from R1 ($1.1849) to target R2 ($1.1983) and $1.20. However, a fall through S1 ($1.1463) and the 50-day ($1.14574) would bring the 100-day ($1.14140) and the 200-day ($1.13911) EMAs into view.

The US Session

It is a quieter day ahead on the US economic calendar. Michigan State Consumer Sentiment numbers will be in focus.

There would need to be a marked improvement in consumer sentiment to move the dial following the US CPI report. Economists forecast the Consumer Sentiment Index to slip from 59.9 to 59.5. Softer numbers would support the Fed pivot bets.

This morning, the probability of a December 75-basis point rate hike stood at 17.0% versus 48.0% one week ago. Barring hawkish FOMC member chatter, bets of a Fed December pivot should remain firm today.

According to the economic calendar, no FOMC members are due to speak today, leaving the markets to monitor chatter with the media.